Deposit Insurance Systems
How FDIC insurance prevents bank runs and protects your savings
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0 / 5 completedWhy Deposit Insurance Exists
Before 1933, bank failures triggered devastating runs—depositors racing to withdraw money before banks collapsed. Deposit insurance broke this cycle by guaranteeing savings, making runs irrational. Today, FDIC insurance protects $10+ trillion in deposits across 4,000+ banks.
Interactive: FDIC Coverage Timeline
Banking Act creates FDIC with $2,500 coverage during Great Depression bank runs
How Bank Runs Destroyed the Economy
1/3 of US banks collapsed. Depositors lost $1.3B ($24B in today's dollars). Runs spread like contagion—healthy banks failed from panic withdrawals.
FDR closed all banks for 4 days. Only solvent banks allowed to reopen. Created FDIC to restore confidence and prevent future runs.
Since FDIC insurance began, no depositor has lost insured funds in a bank failure. Insurance made bank runs economically irrational.
Three Pillars of Deposit Insurance
$250,000 per depositor, per bank, per account category. Joint accounts get $500,000. Different ownership structures multiply coverage.
FDIC takes over failed banks, sells assets, pays depositors. Usually happens over a weekend—depositors get access Monday morning.
Banks pay quarterly premiums based on risk. Fund holds $125B to cover failures. Backed by Treasury credit line if depleted.
Deposit insurance is credible deterrence—banks rarely fail because depositors don't run. The insurance works by almost never being needed.